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More employers are providing pricing and quality information to help employees make smarter health care purchasing decisions.
The late U.S. Senator Everett Dirksen was credited with saying, "A billion here, a billion there, and prett soon you're talking real money." Whether he actually said that or not, it may be the new rallying cry of employers pushing for transparency in health care pricing and quality. Just how many billions could such transparency save? According to a February white paper by Thomson Reuters, as much as $36 billion a year could be saved by using transparency to help reduce price variations for the 108 million Americans with employer-sponsored health insurance.
A growing number of employers are already seeing substantial savings as a result of transparency programs. They believe, as does Steve Filer, senior vice president of product development with Prodigy Health Group in Minneapolis, that transparency offers a real opportunity to bend the cost curve of health care. The benefits management company has seen it work in its own ranks. It teamed with a third-party vendor, Health Care Blue Book, to provide quality and pricing information for its 1,150 employees in 2011. In just one year, it saw a 37 percent savings on MRIs, 48 percent on CT scans and 33 percent on endoscopies.
The push for transparency on cost and quality comes from data that show prices can vary significantly for the same procedure or service even in the same geographical market. For instance, Change Healthcare's latest Healthcare Transparency Index found that a diabetes screening in one community could cost anywhere from $51 to $437, a 755 percent cost difference. Colonoscopies ranged from $786 to $1,819, and Pap smears cost between $131 and $476.
Employers are taking notice. According to the Towers Watson/National Business Group on Health Employer Survey on Purchasing value in Health Care, released in March, 15 percent of employers provide health care pricing information to their employees. Another 22 percent plan to do so next year.
Less than Forthcoming
Obtaining transparency information can be challenging. The same employer survey found that 34 percent of companies required health plans to provide claims data (including discounts and identification of providers) in 2012, and another 12 percent plan to do so in 2013. Still, the survey report also noted that 13 percent of companies had to go outside their health plans to get this information, and 23 percent plan to do so next year.
Employers with self-insured plans have an advantage over those with fully insured ones because self-insured plans allow easier access to claims history that provides a picture of spending on certain providers and procedures. Even then, however, insurance companies may balk, claiming that pricing data is proprietary. "There is a fundamental disagreement between the benefits professionals who run self-insured benefits plans and the health plans regarding ownership of the plans' data," says Shawn Leavitt, vice president of global compensation and benefits with Carlson, a hospitality and travel company headquartered in Minnetonka, Minn.
The company, which has 10,000 covered employees, is partnering next year with a transparency provider, Castlight Health based in San Francisco, because of what Leavitt says is the "failure of the health plans to deliver a product that offers a full transparency model." When he informed the company's health care vendors what it was doing, one of them refused to bid for Carlson's business.
The Memphis Business Group on Health in Tennessee has had few problems obtaining data on provider efficiency, quality and safety, but it has been unable to get pricing information. "We don't have pricing transparency here in the Memphis market," says Cristie Upshaw Travis, CEO of the coalition of 14 member employers who support value-based health care purchasing.
Still, a plethora of companies offer transparency data, some at no cost, which allows even small, fully insured employers and their employees to realize savings. In addition, 16 states have created or are in the process of developing searchable databases to provide data on health care prices, quality or both.
The Time Is Right
Employees in the past were shielded from the actual price tags for health care services because they were only responsible for small co-pays. With the advent of high-deductible health plans, the curtain has been pulled back. Employees have a vested interest in learning how to be smart health care consumers, now that they are bearing more of the brunt of health care costs—40 percent more than they did five years ago, according to the Towers Watson survey.
Employees' relatively new attention to cost and quality can serve as a foundation for learning about transparency. "Already having a consumer-driven health plan before introducing transparency was a definite plus," says Prodigy's Filer, "because the consumer mind-set was moderately in place."
In addition, many people are already searching for pricing information. According to Thomson Reuters-NPR Health Poll results from April, in households where a member had received some kind of health care service in the past year, 16 percent had sought pricing information beforehand—50 percent of those from their physician's office and 49 percent from their insurance companies.
Transparency begins with an employer choosing health plans that provide the best quality at the lowest cost, instead of solely considering cost, says Tanya Alteras, deputy director of the Consumer-Purchaser Disclosure Project in Washington, D.C. "Walk employees through those plans, noting the differences between premiums, deductibles, co-pays, co-insurance and out-of-pocket expenses, based on the employee's specific needs."
Once employees really understand the plans, start discussing cost vs. quality.
"People often associate quality with cost and believe a higher-cost procedure is the better choice, which isn't true," says Ed Isakson, PHR, director of HR for the Archdiocese of Indiana. "The same radiologist can be reading both the higher- and lower-cost MRI."
That is one of the reasons Health Care Blue Book has consumers look up the service first, not the provider. "Doing this gives us an opportunity to educate employees about the service and its components—anesthesia, facility, professional fee—so they understand how their decisions will impact costs," says William Kampine, co-founder and senior vice president, employer solutions, at the Brentwood, Tenn.-based company.
Personalize the information provided to employees, Travis advises. The Memphis Business Group on Health gives a presentation to members' employees, but the real education comes after the presentation. Travis asks employees if they would like her to look up their physicians. "The names start flowing," she says. "So we look up their doctors and their performance. Until you make it real to someone, it is an abstract theory."
Anecdotes are a great way to educate employees about potential cost savings, says Gary Alton, managing partner, employee benefits division, at The Partners Group, a Portland, Ore., benefits and financial consulting group that provides transparency information for its 92 employees and its clients.
The Archdiocese of Indiana's monthly benefits e-newsletter provides testimonials, including one from an employee who saved more than $2,600 on an ultrasound and blood test.
Jane Gile, SPHR, HR director for the City of Manchester, N.H., notes that "Word-of-mouth is one of the best ways to convince other employees to participate."
Employers are also using more-personal strategies to educate employees. Prodigy, which has been purchased by Aetna and now uses that company's transparency data, requires employees to call for precertification for a dozen procedures. The company's benefits team uses those phone calls to provide workers with more-specific information about how the plan works and about opportunities for saving money.
The Partners Group is making its health care carrier, employee assistance program provider and health advocacy provider aware of its initiative to provide transparency so the vendors can advise employees to check with the transparency vendor before making decisions about services.
The Archdiocese of Indiana's health advocacy provider teams with its transparency company to help employees find quality providers at the best price; the transparency company, Health Advocate Inc., walks employees through potential questions related to price and medical issues. In addition, employees participated in an online scavenger hunt with cash prizes so they could learn how to navigate the transparency website.
Peter Isaacson, chief marketing officer at third-party vendor Castlight Health, says once employees use its service, they tend to return.
Being a woman of a certain age, I scheduled an appointment with a gastroenterologist for a screening colonoscopy and was ready to ask all pertinent questions about costs (I had just read the New York Times article "Waking Up to Major Colonoscopy Bills.") I knew I wanted conscious sedation instead of full anesthesia. I also wanted the procedure to be conducted in-office instead of at a hospital or outpatient clinic.
The nurse I met with would not tell me the cost of the procedure. And, while the doctor offered conscious sedation, she spent 15 minutes trying to talk me into full anesthesia (an extra $450). When I explained I had a high-deductible health plan ($6,000 deductible) and needed cost information should my insurance not cover it, the nurse said, "Don't worry. That's why you signed that form saying you'll pay what they don't cover."
"Exactly," I said. "That's why I need pricing information."
She still wouldn't answer and, in fact, walked me out to the waiting room.
—Nancy Hatch Woodward
Setting Up Transparency
Many companies set up an online site for their employees offering customized data available in their market. Third-party vendor Castlight provides pricing data by procedure, provider, health care plan and geography, along with customer satisfaction and data quality. Other vendors offer similar information. Some focus on price or quality, while some also offer educational information and suggest questions employees can ask about costs.
The Archdiocese of Indiana, which partnered with Health Care Blue Book, provides its 6,000 employees with an extensive, searchable list of services and procedures. Each page contains information on the range of charges for in-network providers within a ZIP code, in addition to a dollar amount that is considered a "Fair Price." For example, a physician's charge for a colonoscopy runs from $300 to $580—the Fair Price is $350; facility charges based on where the procedure takes place run from $508 to $3,524—the Fair Price is $850. Employees choose from a color-coded list of quality providers that shows which ones charge above or below the Fair Price. Also included: a summary of employees' in-network benefits, information about incentives for choosing a Fair Price doctor and online scheduling options.
"We don't list the price for two reasons," Isakson says. "First, the price could change. Second, there are proprietary pricing arrangements the providers have with Anthem [Blue Cross] we are not allowed to disclose."
Both the Archdiocese of Indiana and the City of Manchester offer cash incentives to employees who save money on health care services. Isakson says the archdiocese offers incentives that range from $25 to $100 for more than 50 procedures. The higher-end incentives are for procedures such as colonoscopies; since these procedures are provided at no cost to employees as preventive care, consumers have no reason to shop around.
This past summer, the archdiocese started doubling those incentives to help increase participation. The employer will try doing that for six months, Isakson says, to see what amount is needed to motivate employees to use the new resources. If the tactic is successful, the archdiocese may keep incentives elevated.
The City of Manchester uses a different approach with its 1,200 employees. Employees can call in to Compass Smart Shopper and are given the names of the providers with the lowest costs. Incentives vary depending on the procedure and which provider is chosen. Employees who choose the least expensive provider for a colonoscopy, for instance, receive $150; they get $75 for the second least expensive provider and $50 for the third.
Prodigy designed a transparency solution predicated on precertification. It asks employees to call ahead for preapproval of certain nonemergency services. The company sets reference prices, based on Health Care Blue Book's Fair Price, as the maximum amounts it would pay for specific procedures. The prices are high enough to cover the cost for a number of qualified providers, so employees have several choices. If employees decide to use more expensive providers, they are responsible for the additional charges.
Carlson's Leavitt says company officials have not decided which approach to use when they introduce a plan for 2013, but he notes that employers have a variety of methods from which to choose. Among them: reference pricing, shared savings—where employers share any return on investment over a certain level with employees—cash incentives and penalties. The goal is to change employees' behaviors by structuring a plan that works with the organization's particular population.
Employers shouldn't overwhelm employees with too many decisions, experts say. People "can really only focus on a limited number of items," Kampine says. "For the employer and employee, it's best to initially focus on procedures that offer the best savings opportunities and then build out from there."
Prodigy concentrates on about a dozen procedures for precertification. "While we were only mildly surprised by what our vendor identified as the potential savings available to us," Filer says, "we were surprised by the depth of opportunity we had in terms of identifying a broader range of procedures. We thought there would be about three, not the 10 to 12 we ended up focusing on."
The Archdiocese of Indiana provides incentive for just over 50 procedures—the ones that offer the most potential for savings.
The City of Manchester targeted 13 procedures when it teamed with Anthem's Compass Smart Shopper two years ago, but it has increased that number to 40.
A common assumption is that employees need to have a high-deductible health plan to be motivated enough to start shopping around for health care services. But the City of Manchester, N.H., is proof that employees will use transparency information when they are in a health maintenance organization (HMO) or point-of-service plan and contribute only 5 percent toward their health care costs—even when they only have a $5 HMO co-pay.
For the first six months of 2012, the city saved more than $86,000 by offering incentives to employees who used lower-cost providers. That savings came with only a 10 percent participation rate.
In July, employees of the city saw their cost share rise to 12.5 percent and HMO office co-pays increase to $20. Now that employees are paying more of the cost, city officials predict they will see participation rates—and savings—climb.
Return on Investment
Transparency vendors typically price their products based on the number of employees a company has. While The Partner Group's vendor, Compass Professional Health Services based in Dallas, charges individuals $8.95 per month and families $17.95 per month, The Partner Group joined forces with four other consulting companies and negotiated a rate of $4.50 a month per employee.
Companies that have implemented transparency plans are starting to see preliminary evidence of savings. The City of Manchester saved more than $86,000 in the first half of 2012, with only a 10 percent participation rate and the majority of the city's employees enrolled in either a health maintenance organization or a point-of-service plan. The Archdiocese of Indiana, which fully implemented its transparency plan in April 2011, expects to realize a $500,000 savings annually when employees have a chance to get acclimated to it. Prodigy is still putting its numbers together, but its savings for procedures such as MRIs, CT scans and endoscopies ranged from 33 percent to 48 percent in one year. And Leavitt, who has previous experience with transparency programs, says he expects Carlson to see an immediate return on investment.
Going Beyond Basics
Price and quality are only the beginning, Leavitt says. Real transparency will mean having information on practice patterns. For instance, "If every time a patient goes to see a certain OB/GYN, the doctor runs a full metabolic panel, regardless of the kind of visit, it may be because he has the machine to do the test and uses it to drive revenue," Leavitt says.
Filer predicts that in two to three years, most employers will be taking advantage of transparency products. The value is just too good to ignore.
The author is a freelance writer based in Chattanooga, Tenn.
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